The Difference Between the US Federal Debt and Deficit

You hear these terms (deficit and debt) thrown around all the time in the news. I thought it might be good to share the current numbers and arm you with a brief definition of each one.

The US Federal Debt

The US Federal Debt is simply the total amount of money the US Federal Government currently owes. This money is primarily owed to the Fed and other government accounts. About 25% is also owed to foreign governments. The debt is issued in savings bonds, treasury noted, and treasury bills.

According to the US Debt Clock, we’re approaching $13 trillion in debt. Considering our population, your share of that debt is around $42K if you divide everything equally.

The US Federal Deficit

The reason we have the debt is because our government officials (Congress) create budget deficits every year. The deficit is the difference between annual spending and “income” (i.e. taxes). Congress and the President are, in effect, spending more than they earn. The deficit in 2009 was $1.4 trillion.

Even if you are a fan of Keynesian Economics, robbing from the future to pump things up now can’t be done forever, right? We’ve got to become savers at some point.

How to Protect Yourself from Future Taxes

If it seems like you have no control over what goes on in Washington, then I suggest you do something for yourself instead: open up a Roth IRA. Use your current after-tax dollars to fund this account and you’ll never pay taxes on that money, or it’s earnings again. So even if we’re paying 40% and 50% rate taxes in the future. That Roth IRA money and earnings won’t pay a dime. You can contribute $5,000 annually to this type of account. Get to it!

Personal Finance Links

My latest guest posting spots…

Interesting post from around the ‘sphere…

Has your bank acted illegally? If so, Ron from The Wisdom Journal has some nice advice about what to do. It includes a guide for contacting the Federal Reserve, who has a process for handling complaints about banks.

Are you on the hunt for a Realtor to help you sell your house? Here are some questions to ask a Realtor when selling your house. Ben from Money Smart Life shares some nice questions from other contributors as well.

Learn to live on one income before you have to. Pete from Bible Money Matters shares this very challenging post.

Jeremy from Generation X Finance shares a great list post: the 7 biggest money problems people have. Check out this post to see if you have any of these problems. More importantly, see if there is something you can do about it.

Craig from Free from Broke shares some of the reasons to like credit cards. I have a love / hate relationship with credit cards. These days they are just more trouble than they are worth for me. But I’ve used them in the past and have enjoyed the benefits.

Carnivals I participated in last week…

Frugality, Personal Finance, Best of Money, Money Stories, Festival of Stocks, Economy and Finances, Financial Planning, Financial Independence, Money Hacks



Last Edited: May 19, 2015 @ 9:06 am The content of ptmoney.com is for general information purposes only and does not constitute professional advice. Visitors to ptmoney.com should not act upon the content or information without first seeking appropriate professional advice. In accordance with the latest FTC guidelines, we declare that we have a financial relationship with every company mentioned on this site.
About Philip Taylor

Philip Taylor, aka "PT", is a CPA, financial writer, FinCon CEO, and husband and father of three. He created PT Money back in 2007 to share his thoughts on money and to meet others passionate about managing their finances. All the content on this blog is original, and created or edited by PT. Read more about Philip Taylor, and be sure to connect with him on Twitter, Facebook, or view the Philip Taylor+ Google profile.

Comments

  1. Mrs. PT says:

    Good information. Thanks for the lil lesson. See, I’m *always* learning 🙂

  2. When I read about a national debt of trillions of dollars, it makes my mortgage debt seem so insignificant and so much more manageable….

    thanks for mentioning the post on choosing a realtor!

  3. Thanks for the link. Hopefully they won’t change things up in the future and decide to start taxing those Roth accounts – I wouldn’t put anything beneath them!

  4. @Mrs. PT – Glad I can provide this service.
    @Ben – no problem
    @Peter – I think the one thing that will protect the Roth is that not enough people use them to make much difference. Of course, that also means that less people would throw a fit if they did tax them.

  5. Great idea to explain the difference between budget deficit and debt. The trade deficit is another term that gets thrown around…